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Month: January 2018

The moment you focus on what’s at stake, you feel pressure. And, pressure has all the characteristics of the resistance – it is useless, toxic, and paralyzing all at once.

No one is above dealing with pressure. Pre-2017 Roger Federer, even then likely the greatest tennis player of all time, used to inevitably crumble when he played Rafael Nadal in a grand slam final. You could see the unforced errors coming even before the game began. That changed a few games into in the fifth set of the 2017 Australian Open Final. You could sense it from the way he played. Federer was above the stakes. He was seeing past the stakes and was focused, instead, on enjoying himself.

What followed was exhibition tennis – a backhand that was once the source of most of those unforced errors morphed into his weapon of choice. And, there’s been no looking back since then. Federer has won 3 of the last 5 grand slams – effectively cementing his place as the great player of all time.

Great players across sports have had similar awakenings toward the end of their careers and have served up some of their best performances when we expected them to go quietly into the night.

There’s a thing or two for us to learn as we focus on the next important meeting/presentation/performance review. It is okay to be aware of the stakes. But, we’re better off focusing on being the best version of ourselves and having fun with and in the process.

Doing so makes it most likely we will produce work that has the kind of impact we hope for.

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I am in the midst of a blogging dry spell. This means shipping every day is more of a struggle than it usually is. Writing takes longer as I frequently delete everything I write and start all over again.

But, on the bright side, experience helps. I’ve been attempting to do this for nearly ten years now and I know I just need to get through this slump, one day at a time. In that process, I’ve also learnt the difference between winning and demonstrating professionalism.

Winning generally happens on our best days. These wins form our highlight reel and generally showcase what’s best about us. My best posts were written on such days. I was in flow and I felt it. But, our professionalism is a function of how we show up on our worst days – the days we’d rather curl up in bed rather than show up and be present.

This difference is on show in blogging as it is in our careers and our personal lives. I’ve experienced this a lot as a parent. There are days when everything feels like a win – these are the days with great memories and wonderful photographs. But, my character as a parent is a function of how I show up when I’d rather stay in bed that day. Our daily habits, regardless of whether it is a good day or bad day, reflect our character.

There was a time when I thought winning was all that mattered. But, I’ve come to appreciate the difficulty of showing up as a pro. All winners are not professionals. But, in the long run, all professionals are winners – in more ways than one.

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Arthur C Pigou, a British economist, wrote an important book called “The Economics of Welfare” in the 1920s. His argument in the book was that industrialists seek their own “marginal private interest” and have no incentive to internalize “marginal social cost.”

To illustrate this with an example – let’s imagine that an industrialist builds a factory in a previously quiet neighborhood. This factory will likely cause congestion and pollution. But, the contractor doesn’t get affected by these costs if all he does is pay rent.

This divergence has two first order consequences –

The industrialist creates the social harm but doesn’t pay for it.

As a result of not paying for the harm, he over produces and creates a net-negative social return.

Economists call such effects “negative externalities.”

Of course, this is all not academic. This is a graph of the amount of energy used by Bitcoin miners. In March 2017, Bitcoin miners used double the energy consumption of Nicaragua. This graph has continued to move upward with the surge in crypto activity in 2017.

The current estimate is that Bitcoin miners use as much electricity as all of New Zealand.

So, why still do so? Because it is still profitable. Or, to think of it as Arthur Pigou might have, it is still profitable sans the marginal social cost. The environmental footprint of this energy consumption makes no sense. But, that is at the heart of understanding the concept of negative externalities.

Pigouvian taxes. Arthur Pigou’s solution came to be known as a Pigouvian (or Pigovian) tax. This is a tax on any market activity that produces negative externalities. This is why we tax alcohol and cigarettes. Taxes are a very efficient mechanism to reduce negative externalities and prevent over consumption as it deters over production/consumption.

However, there is one important underlying assumption with Pigouvian taxes – they work best when our estimates of costs and benefits are correct.

As we all know, short term costs and benefits are far easier than measure than long term costs and benefits. And, given the fact that adding taxes is a sure shot strategy for a politician to give up hopes of re-election, it takes a really long time for us to tax areas where taxation would otherwise be an obvious solution.

Hence, we live in a world where there is no tax on sugar in carbonated drinks or on Carbon emissions – even though both have been shown to be harmful to us.

Regulating technology. The biggest challenge with regulating any businesses at the cutting edge is that it is unclear, for long periods of time, what negative externalities are. For example, even if it was evident to many individual users that using Facebook didn’t their improve mental well being, it wasn’t commonly accepted.

Now, of course, Facebook’s executives have admitted that Facebook was not the best way to use your time. And, they’re making changes to the news feed to fix that.

It is still unclear what the long term benefits of being addicted to social media are. I was in India recently and found myself surprised at the extent of the Whatsapp addiction amongst adults. My guess is that we’ll look back at these times the same way many look back at smoking in the US in the 1960s (i.e. we’ll ask – how the hell did we allow ourselves to do that?)

Of course, it is easy to point fingers at Facebook’s executives and accuse them of “hacking” our brains. But, they were people like you and me responding to financial incentives. The problem, more likely, is a blind belief in capitalism.

Unbridled. Seth Godin (who authors the best blog I’ve had the privilege to read) had a powerful post titled “Unbridled.”

There’s a school of thought that argues that markets are the solution to everything. That money is the best indication of value created. That generating maximum value for shareholders is the only job. That the invisible hand of the market is the best scorekeeper and allocator. “How much money can you make?” is the dominant question.

And frequently, this money-first mindset is being matched with one that says that any interference in the market is unnecessary and inefficient. That we shouldn’t have the FDA, that businesses should be free to discriminate on any axis, that a worker’s rights disappear at the door of the factory or the customer’s at the lunch counter–if you don’t like it, find a new job, a new business to patronize, the market will adjust.

Taken together, this financial ratchet creates a harsh daily reality. The race to the bottom kicks in, and even those that would ordinarily want to do more, contribute more and care more find themselves unable to compete, because the ratchet continues to turn.

The problem with a race to the bottom is that you might win. Worse, you could come in second.

There are no capitalist utopias. No country and no market where unfettered capitalism creates the best possible outcome. Not one. They suffer from smog, from a declining state of education and health, and most of all, from too little humanity. Every time that the powerful tool of capitalism makes things better it succeeds because it works within boundaries.

It’s worth noting that no unbridled horse has ever won an important race.

The best way for capitalism to do its job is for its proponents to insist on clear rules, fairly enforced. To insist that organizations not only enjoy the benefits of what they create, but bear the costs as well. To fight against cronyism and special interests, and on behalf of workers, of communities and education. That’s a ratchet that moves in the right direction.

Markets fail. The post is both poignant and powerful and drives home an important point – markets fail. Capitalism fails. There is no cure all.

Facebook’s recent admission was in contrast to the rise of their stock price (up and to the right). Bitcoin’s rise doesn’t consider the immense cost of electricity used to mine it.

These are just two examples of market failure in technology – among many.

As Arthur Pigou foresaw in the early 1900s, the challenge with capitalism is that it drives rational humans to irrational extremes because it doesn’t require them to internalize social costs. That’s why Pigouvian taxes matter. Taxes remind us of the negative externalities we create.

This isn’t a corporate thing either. Aeon had a thought provoking post asking the question – what would happen if we were all taxed on our energy footprint?

Would we continue flying around the world for leisure? Would we use disposable diapers? Would we still buy beef? Would we still buy gasoline cars?

As I grow older, I realize that the best way to predict human behavior is to take a look at the incentives. In the absence of self awareness (and there never seems to be enough of this flying around), we are our incentives.

We aren’t incentivized to think of the negative externalities we create. But, it matters that we do.

Taking more responsibility. For those of us either working in tech or aspiring to work in tech, it is so critical we think of these incentives and the behavior it drives. Once you are in an industry and environment that is growing, it becomes clear that the hard thing isn’t about making the next buck. It is about asking – “but, at what cost?”

It doesn’t have to be this way. Shareholder value need not be what we maximize. We just need to care enough to have the tough conversations around the consequences of what we do.

Or, as Seth might say – it is on us to remember that civilization doesn’t exist to maximize capitalism. Capitalism exists to maximize civilization.

(For my part – for every few posts where I gush about the prospects of artificial intelligence, the blockchain and so on, I’ll make sure I intersperse rants like this one to question blind beliefs on the brand of capitalism we take for granted. Thanks for reading this far.)
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Quick note on these technology notes: This is a bi-weekly post as part of the “Notes by Ada” project. I send these as a weekly newsletter and experimented with posting these elsewhere. But, I’ve decided to share them on this blog one week after the newsletter goes out.

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Dan Pink’s new book “When: The Scientific Secrets of Perfect Timing” has some fascinating insights on how we can set our days up for problem solving versus insights. First up, let’s consider 2 puzzles.

The Linda Problem – a test of problem solving

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations. Which is more probable?

Linda is a bank teller.
Linda is a bank teller and is active in the feminist movement.

The Ernesto coin problem – a test of insight

Ernesto is a dealer in antique coins. One day, someone brings a beautiful bronze coin. The coin has an emperor’s head on one side and the date 544 BC stamped on the other. Ernesto examines it – but instead of buying it, he calls the police. Why?

The Linda problem is a test of logic and requires vigilance. The common mistake that people make is to say that the description makes it more likely that Linda is both a bank teller and active in the feminist movement. But, of course, it is more likely that Linda is a bank teller as the second option is a subset of the first.

The Ernesto coin problem is one of those where you have to let the insight hit you. Once you notice let the fact that the date of 544 BC could not have been legitimate (how did they know Christ would be born 544 years laterthe problem is solved. Solving insight problems actually requires less vigilance.

Researchers who’ve tested people on their ability to solve Linda and Ernesto problems have uncovered some fascinating insights on timing-

The morning is best for tests of vigilance – problem solving and detail work. The late afternoon is best for solving insight problems as we let insights come to us during a period of less vigilance.

Why? Researchers found that, for 75% of us, our energy over the course of the day, regardless of where we are from, spikes in the morning, goes down in the afternoon and rebounds in the evening. For the 25% of us who are “owls” by nature, the highest spike happens in the evening. So, the pattern of solving Linda problems versus Ernesto problems was reversed for owls versus larks and everyone in between.

An interesting note – high school and college years tend to convert more folks into owls (this happened to me). And, men tend to be more likely to be owls than women.

We all know that timing plays a big role in our external success. But, few realize how important timing is to our day-to-day productivity. It is important we understand it and design for it.

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Prioritization and effective time management are generally framed around what we say no to. We need to say no to hundreds of projects to be able to do justice to what’s important.

While that is true, saying no is hard for most folks. And, it certainly feels tiring to do so repeatedly.

An alternative framing I’ve found helpful is around what we say yes to. Whenever we say yes to something that isn’t important, we are effectively saying no to something that is.

A request for a 30 minute coffee tomorrow that isn’t high priority seems harmless. However, losing 30 minutes would mean staying later at work and spending less time with the family that evening. This framing ensures we put every yes in context and remind ourselves more regularly about what matters.

And, the more we remind ourselves of and say yes to what actually matters, the more effective our days become.